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Bid-Ask Spread Patterns and the Optimal Timing for Discretionary Liquidity Traders on Xetra

Author

Listed:
  • Martin Angerer

    (University of Liechtenstein)

  • Georg Peter

    (University of Liechtenstein
    LLB Asset Management AG)

  • Sebastian Stoeckl

    (University of Liechtenstein)

  • Thomas Wachter

    (LGT Bank Bendern)

  • Matthias Bank

    (University of Innsbruck)

  • Marco Menichetti

    (University of Liechtenstein)

Abstract

This paper explores the statistical and economical significance of intra-day and -week patterns in bid-ask spreads. We investigate a large panel of high frequency data for stocks traded on the XETRA trading platform and observe significant patterns in spreads. In addition to showing the robustness of our findings over time, as well as in cross-section, we are also able to demonstrate the patterns’ predictability in an out-of-sample approach. Our findings have clear implications, especially for uninformed but discretionary liquidity traders, which allow significant and economically relevant reductions of transaction costs.

Suggested Citation

  • Martin Angerer & Georg Peter & Sebastian Stoeckl & Thomas Wachter & Matthias Bank & Marco Menichetti, 2018. "Bid-Ask Spread Patterns and the Optimal Timing for Discretionary Liquidity Traders on Xetra," Schmalenbach Business Review, Springer;Schmalenbach-Gesellschaft, vol. 70(3), pages 209-230, July.
    • Handle: RePEc:spr:schmbr:v:70:y:2018:i:3:d:10.1007_s41464-018-0049-z
    DOI: 10.1007/s41464-018-0049-z
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    References listed on IDEAS

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    More about this item

    Keywords

    Intra-day; Bid-ask spread; Liquidity; Timing; Discretionary trader;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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